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Paid Time Off Policy: Should You Bundle Vacation and Sick Time?

Posted by David Peasall, VP, Benefits and Human Resources on Nov 18, 2020 11:25:00 AM
David Peasall, VP, Benefits and Human Resources

vacation note office

Paid time off (PTO) is one of the most common benefits employers offer. In fact, it’s something employees expect. There’s been a growing trend among employers to bundle PTO by combining sick and vacation time (called flex PTO) for employees to use as they please. Although many organizations are jumping on this bandwagon, is it really the best paid time off policy?

 

The idea is that flex PTO is more accommodating for employees. But before you decide whether this is the best decision for your company, consider the following.

Choosing a PTO Plan

Previously, it was common for employers to allot a certain number of annual paid vacation days to each employee based on each individual’s years of service. For example, an employee who’s worked with your company for one year might have two weeks of personal days, whereas someone who’s been with the company for five years might have three. In this case, sick time is usually accrued monthly rather than assigned upfront.

 

Some employers have tried to shake things up by experimenting with “unlimited” paid time off policies. That leaves scheduling to be hashed out between employees and their supervisors. Scheduling and tracking PTO without putting a cap on employee time can get complicated.

 

More commonly, though, employers are moving to PTO banks that bundle all forms of paid time off together. This allows the employees more freedom to choose how they want to use their time. But it might not work for all employers due to state and local laws governing sick leave.

Navigating Sick Leave Laws

Some states and cities, including California and New York City, have laws that require employers to provide employees with a certain amount of paid sick hours. That doesn’t mean employers in these areas can’t use PTO banks, but it does make the administration a little more challenging. In this case, the employer is being forced to offer an increased benefit, being paid sick time, which may force them to evaluate lowering the PTO benefit. Designated paid sick days, but fewer paid personal days may not be well-received by employees.

For example, employers in California can provide a PTO bank, but sick days must be kept out of the bundle. So, what’s the point? Employers in areas with stricter sick time laws may shy away from offering employees PTO banks for this reason.

There are other concerns, too. One is that PTO banks, as opposed to dedicated paid sick time, could encourage people to come to work even when they’re sick because they’d rather save their days for vacation.

 

Let's say you have an employee who’s used all their time by August, then gets sick in November. That puts the employer in a position to either force the employee to take the time unpaid, or advance PTO from the coming year. Neither option is ideal.

Although, with the rise of the COVID-19 pandemic this year, we have seen many organizations offer flexible options for their employees, like working from home when sick. Offering this flexibility keeps your employees from making the tough decision of choosing between saving their PTO days and the health of their coworkers.

Making a Decision About Your Paid Time Off Policy

One way to avoid being in an uncomfortable situation is to allow your employees' paid time off hours to occur over time. Let’s say you want to offer 20 days of PTO to your workers. The best solution may be to a calculation such as 1.5 days per month. That way, they can’t take more days than they have, and they likely won't run out in the event they need a number of days at the end of the year.

If you’re thinking about using a PTO benefit with your employees, ask yourself:

  • Will unused personal time roll over?
  • Should employees be allowed to cash out unused PTO hours?
  • Can your HR department handle the administrative requirements?
  • Does the state where you do business require payout upon termination of employment?

The best way to decide which PTO policy is right for your business is to carefully consider the pros and cons explained above prior to making that decision. Additionally, speaking with your Human Resources Consultant or labor attorney would be important for compliance purposes.

 

A Business Owner's Guide to HR

 

Topics: Human Resources

David Peasall, VP, Benefits and Human Resources

Written by David Peasall, VP, Benefits and Human Resources

David Peasall joined FrankCrum in 2010. Since that time, he has served as the Vice President, Benefits and Human Resources overseeing human resources, employee benefits, and group health sales. Serving in the Army, he began his 20+ year career in human resources and benefits administration and has held several management positions within the corporate and public human resources environments overseeing employee benefits sales and administration, recruitment, compensation, employee relations, organizational development, and compliance. He has the nationally recognized designation of Senior Professional in Human Resources (SPHR), PPACA certification from NAHU, and a Bachelor’s degree from Barry University with a dual major in Human Resources Management and Health Services Administration. He has written for the Society for Human Resources Management, HR Insight, Proyecto Magazine, and for online publications in the restaurant and health care industries. While not at work, this Florida native loves spending time with his family, preferably boating, fishing, and diving the beautiful waters of Florida.

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